Cyprus shuts down banks until next week

21st Mar 2013

Cypriot banks are to remain closed until early next week. The decision came as officials in Cyprus scrambled to raise the money international lenders have demanded in order for the island to receive a bailout.

By Wednesday evening, Cyprus announced almost another week of closed banks in order to keep Cypriots from withdrawing too much money while politicians work to appease international lenders. They would likely reopen on Tuesday due to the upcoming three-day weekend, according to Cyprus central bank spokeswoman, Aliki Stylianou.

Meanwhile, the government scrambled to find an alternate plan to raise money required to receive an international bailout, but still had not come up with a “Plan B” by the evening. Attempts to renegotiate the terms of the deal with the EU and IMF were met with rejection.

Cypriot President Nicos Anastasiades told the country’s CNA news agency that a deal would have to be reached on Thursday.

Cabinet discussions continued into the night on Wednesday, with politicians telling reporters they were committed to finding a solution rapidly.

“We will not sleep tonight until we find a solution… I am confident we will find a solution so we do not go bankrupt,” acting leader of the ruling party, Democratic Rally, Averof Neophytou, said. “We don’t have days or weeks, we have only hours to save our country.”

Bailout dealout triggers panic

Over the weekend, the conditions set by eurozone lenders for a 10-billion-euro ($13 billion) bailout needed to stave off bankrupty caused widespread panic among Cypriots, leading to the current bank shutdown.

The eurozone bloc, as well as the International Monetary Fund (IMF), had stipulated that Cyprus must raise 5.8 billion euros ($7.5 billion) in order to help recapitalize its banks and service the national debt. In return, the lenders would grant the bailout. Together they agreed to raise the money through a levy of up to 9.9 percent on Cypriot savings accounts.

Following the news, a wave of distressed Cypriots rushed to cash machines to salvage their savings, causing the government to close banks until at least Thursday for fear of the impending damage mass cash withdrawals could cause. They also capped ATM transactions at 800 euros.

The strong reaction forced Cyprus’ 56-member parliament to put the measure to a vote, which was ultimately defeated. Thirty-six parliamentarians voted against the bank tax and 19 abstained. One lawmaker was absent.

German Chancellor Angela Merkel weighed in saying the Cypriot government must find a new plan, but that it was not unfair to require account holders with over 100,000 euros to contribute to the bailout funds.

No results in Russia

Cyprus Finance Minister Michalis Sarris met with Russian officials for two rounds of talks in Moscow on Wednesday, but he was unable to renegotiate the terms of a Russian loan of 2.5 billion euros.

In response to the situation, Prime Minister Dmitry Medvedev said that the bailout for Cyprus had not been handled properly, but that Russia and the EU would still remain on good terms.

Finance Minister Sarris was scheduled to return to the negotiating table on Thursday.

The low taxes and high interest rates offered by Cypriot banks have made the island into an attractive tax haven. Non-EU citizens and companies, most notably from Russia, have deposited a high level of money there.

The rating firm Moody’s estimates that Russian companies and banks have up to 31 billion euros in Cypriot bank accounts, up to half of all deposits.

Orthodox Church offers help

While wealthy Russian residents of Cyprus have been reacting with anger to any proposals, which they say unfairly target their money, the island’s Orthodox Church has offered to come to the rescue.

“The entire wealth of the Church is at the disposal of the country … so that we can stand on our own two feet and not on those of foreigners,” said Archbishop Chrysostomos after a meeting with the prime minister early on Wednesday.

The crisis is unprecedented in the history of the island of 1.1 million people, which suffered a war and ethnic split in 1974 in which a quarter of its population was internally displaced. Cyprus needs 15.8 billion euros to bail out its banks and shore up government finances to avoid default.

EU officials emphasized that the tax measure was to be a one-off exception, but fears have grown that savers in other, larger countries in the 17-nation eurozone might be spurred to withdraw funds.

The Muslim News Awards for Excellence 2015 was held on March in London to acknowledge British Muslim and non-Muslim contributions to the society.

The Muslim News Awards for Excellence 2015 was held on March in London to acknowledge British Muslim and non-Muslim contributions to the society.

The Muslim News Awards for Excellence event is to acknowledge British Muslim and non-Muslim contributions to society. Over 850 people from diverse background, Muslim and non-Muslim, attended the gala dinner.